Correlation Between Bank of America and Leverage Shares

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Can any of the company-specific risk be diversified away by investing in both Bank of America and Leverage Shares at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank of America and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Leverage Shares 1x, you can compare the effects of market volatilities on Bank of America and Leverage Shares and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank of America with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Leverage Shares.

Diversification Opportunities for Bank of America and Leverage Shares

BankLeverageDiversified AwayBankLeverageDiversified Away100%
-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and Leverage is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Leverage Shares 1x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 1x and Bank of America is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank of America are associated (or correlated) with Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 1x has no effect on the direction of Bank of America i.e., Bank of America and Leverage Shares go up and down completely randomly.

Pair Corralation between Bank of America and Leverage Shares

Considering the 90-day investment horizon Bank of America is expected to under-perform the Leverage Shares. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.7 times less risky than Leverage Shares. The stock trades about -0.33 of its potential returns per unit of risk. The Leverage Shares 1x is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Leverage Shares 1x on November 29, 2024 and sell it today you would earn a total of  3.00  from holding Leverage Shares 1x or generate 1.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Bank of America  vs.  Leverage Shares 1x

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505
JavaScript chart by amCharts 3.21.15BAC SJPE
       Timeline  
Bank of America 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb434445464748
Leverage Shares 1x 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Leverage Shares 1x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leverage Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.12.152.22.252.32.352.42.452.5

Bank of America and Leverage Shares Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.85-1.4-0.95-0.5-0.070.310.761.211.662.11 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15BAC SJPE
       Returns  

Pair Trading with Bank of America and Leverage Shares

The main advantage of trading using opposite Bank of America and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Leverage Shares can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Leverage Shares will offset losses from the drop in Leverage Shares' long position.
The idea behind Bank of America and Leverage Shares 1x pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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